LoanSafe Member

Hi, I have been reading all the posts on this forum, which is very helpful, but my head is starting to spin.

I bought a townhouse in 2003 and lived in it for 7 years. Within a year of buying it, the home values in my neighboorhood skyrocketed, from the $190K that I paid, to $325. It was my first home and the only experience I had, so I had no idea this wasn't normal. Needless to say, I accepted the offer for a HELOC with BOA and eventually refi-ed the HELOC with USAA, and they gave me a line of $75k. So my numbers are:

$190 first w/ PNC
$48K HELOC w/ USAA
Home value: $200-207

I ended up moving in December of 2010 to a new home when my son was born to be closer to family. By that time, I now owe $190K on the 1st with PNC and about $48K for the second with USAA. The home values in the area are at about $200K. I decided to rent it out, which worked out for awhile. It is near a military post so not too hard to find renters. The last couple moved out 6 months early in September of last year, they used their military clause. When they moved, there were a lot of repairs (mostly cosmetic) that needed to be made so no one wanted to rent it. It also smelled like cat pee, which was alleviated when I removed an area rug that was in the laundry room near the cat box. I tried to refi so that the payment was affordable, I was paying out of pocket anywhere from $150-$250 a month since i rented it, but because it is an "investment property" in their eyes, there are no options when you are underwater.

I called a realtor who convinced me a short sale was the way to go. Because PNC would get their full amount, or close to it, he told me it would be a breeze. Apparently, he had never dealt with USAA. We got a cash offer of $190 and my realtor thought they would jump on it, but USAA refused to take the $5K that was offered.

Somewhere along the way, PNC said they didn't get some paperwork because my realtor emailed instead of faxed it, they closed my file for the SS, and I got a foreclosure notice. I had only missed 3 payments at that time, now 4 payments. I called and we straightened it out, resent everything -its becoming a full time job getting them the paperwork they need. Their appraiser apprasied the place for $240, even though regular sale homes are only going for about $207 at the most, so now it looks like the SS won't happen. They refuse to consider any number other than their appraisal.

I called today for an update and she told me it was still in the foreclosure process and they were still reviewing the file for the short sale. Seems contradictory to me.... Three or four missed payments just seems crazy for a foreclosure. I have friends who didn't pay for 3 years before they were foreclosed on.

I am mostly worried about USAA, the realtor commented that they will probably not settle or they will release the lien and keep the option of going after the balance. He claims they probably wouldn't, but its an option. I don't want to sign anything unless I am released from the debt completely. If I am going to keep paying for a house, I may as well go further into CC debt and make the repairs and rent it again.

LoanSafe Member

I live in Maryland, btw. And I don't need a mortgage anytime soon, I plan to stay in my home, which is a 15 year with Wells Fargo at 2.875%. I figured a SS would be off my credit before I shopped for a new mortgage. I am also unemployed as of the end of December, which I am hoping helps my case and will push them to accept an offer. It isn't like there is any way to get any money from me, I am lucky to have kept my head above water with my primary residence.

Call 1-800-779-4547

Unfortunately, short sales/DILs are very difficult to accomplish when you have a 2nd lien attached to the property. No matter how experienced your RE agent may be, he cannot force USAA to accept the settlement amount and release the lien. This leaves you in a tough spot as the only other option to rid of the property is to simply let it foreclose.

There's another option you can explore which may enable you to settle your HELOC for pennies on the dollar and only have a 1st to deal with, however your property is in one of VERY few states that allows a secured junior lien holder to sue the borrower prior to foreclosing. The last thing I would do is rack up more CC debt to bring the mortgage(s) current as you'll likely be in a much worse position later and be forced to file BK. If it were myself I would roll the dice and pursue a settlement on your 2nd mortgage and a loan modification on your 1st if you're able to make the needed repairs and rent out the property. You can find everything you need to know about settling an underwater 2nd in the following thread:

NOTE: Please address questions or mortgage troubles here in the forum and we'll respond as soon as possible. Thanks!

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LoanSafe Member

Unfortunately, like a lot of people I have read about... the payment was low enough that I kept paying the 2nd after I stopped paying the 1st, so I am only about 2 months behind on that one. Had I discovered this site a year ago, I probably would have stopped paying long ago. But I had no idea I would find myself in this situation.

LoanSafe Member

Update: Not much has happened, except all my available credit on my credit cards is now gone. Once the missed mortgage and HELOC payments hit my credit report, Bank of America dropped my credit card limit to the amount that I owed on them. Last week, chase did the same thing. Now I am unemployed and have no available credit, and my credit score is going down even further because my cards are all close to being maxed out instead of being no where near that. I didn't plan to use that credit, but it was nice to have it as a back up.

I got an email from my realtor's partner, the one who does the negotiating, and he said the best we can hope for is that USAA will accept $5K from the short sale to release the lien, then I will have to deal with them on negotiating the rest. Not happy about that, I feel like they want to close the sale and then I am on my own.

What is the benefit of doing a SS over foreclosing at this point? Would the second mortgage be written off in a FC or would I still owe them the money?

LoanSafe Member

It looks like foreclosure is the likely outcome. The bank just appraised the place for $250K, even though the houses in the area are selling between $192-$213K. The won't look at any numbers but that one - no comps, nothing. No way anyone is going to give them want they want for a short sale if its more than they would spend for a normal sale. Even though I only owe them about $187K… my realtor said they insist on bringing in a percentage of the value of the home. I am pretty much out of options and hope my security clearance will survive a short sale. I have reported it to security, but that was a short sale… we will see. I am done. I am tired of providing paperwork. I want to take out a 401K loan to do some updates to my house, but don't want them to see any money going into my account. I really don't see any other way than a foreclosure, then dealing with the HELOC with USAA. That should be fun. My credit is in the toilet anyway, just worried about my job at this point.

LoanSafe Member

They closed the short sale file today, told us the house didn't qualify because the value is too high. Told us to contact the foreclosure lawyer to get a payoff amount. Guess I am out of options. pretty discouraged.